Bloomberg News

U.K. Stocks Rise on China Demand Prospects; Xstrata Gains

May 22, 2012

U.K. stocks climbed the most in more than three months, led by a rally in mining companies, amid a report China is seeking to speed up construction projects spurring demand for industrial metals.

Xstrata (XTA) Plc rose as the company forecast Chinese demand for copper will recover in the second half of the year. Vodafone Group Plc (VOD) gained after reporting revenue growth that beat analyst estimates. Barclays Plc (BARC) and Royal Bank of Scotland Group Plc (RBS) led an advance in lenders’ shares.

The FTSE 100 Index added 1.9 percent to 5,403.28 at the close in London, the biggest increase since Feb. 1. The gauge lost 5.5 percent last week and has tumbled 9.4 percent from its 2012 high on March 16 amid mounting concern Greece may be forced leave to the euro area. The FTSE All-Share Index rose 1.8 percent today, while Ireland’s ISEQ Index climbed 1.9 percent.

“Murmurings from China of it sustaining growth is helping to underpin sentiment,” said David Jones, chief market strategist at IG Index in London. “Movements in the mining sector always have a disproportionate effect on the FTSE 100. (UKX)”

Stocks rose yesterday, snapping a five-day selloff, after Chinese Premier Wen Jiabao said his government will focus more on bolstering economic growth.

The China Securities Journal today reported the country plans to speed up approval of infrastructure projects. This year’s investment plans must be submitted before the end of June and the government may allocate construction funds earlier than planned, the newspaper said.

Stimulus Program

In the U.K., the International Monetary Fund called for the Bank of England to add stimulus to help support the British economy. While the central bank halted its so-called quantitative-easing program this month, policy makers have left the door open to more bond purchases as the BOE lowered growth forecasts.

Consumer prices rose 3 percent last month from a year earlier, down from 3.5 percent in March, the Office for National Statistics said today in London.

Barclays increased 4.9 percent to 188.9 pence. RBS gained 5.5 percent to 21.95 pence. Lloyds Banking Group Plc (LLOY) added 4.5 percent to 27.62 pence.

Xstrata, the world’s fourth-biggest copper producer, climbed 3.2 percent to 972.9 pence. The company said it expects Chinese demand for the metal to recover in the second half as the government takes steps to boost growth.

Consumer Demand

Demand for white goods and household appliances, one of the main uses for copper, as well as continuing year-on-year growth in China’s power generation sector will benefit from China’s stimulus efforts, Charlie Sartain, chief executive officer of the Xstrata’s copper unit said in Sydney today.

Antofagasta Plc (ANTO) rose 4.5 percent to 1,076 pence, Vedanta Resources Plc (VED) gained 3.9 percent to 1,047 pence and Rio Tinto Group jumped 4 percent to 2,936.5 pence.

Anglo American Plc (AAL) climbed 3.1 percent to 2,087.5 pence. The London-based mining company and Codelco, Chile’s state-owned mining company, agreed to talks to try to resolve a dispute over ownership of Anglo’s local unit and asked a court to suspend proceedings.

Vodafone advanced 4.2 percent to 172 pence, for the biggest contribution to the FTSE 100’s increase. Europe’s largest mobile phone company reported a 2.3 percent increase in fourth-quarter service revenue growth, excluding currency swings and acquisitions, as German customers increased spending.

That followed a 0.9 percent rise in the previous quarter and beat the average analyst estimate of 1.7 percent gain.

CRH, Carnival

CRH Plc (CRH) climbed 3.8 percent to 14.35 euros in Dublin as Credit Suisse upgraded the building-materials maker to neutral from underperform.

Credit Suisse analysts also reiterated their outperform rating, the equivalent of a buy, for Wolseley Plc (WOS) and Travis Perkins Plc (TPK) sending the shares up 4.6 percent to 2,255 pence and 3 percent to 949 pence respectively.

Carnival Plc (CCL) rallied 4.3 percent to 2,077 pence as analysts at Exane reiterated their outperform recommendation for the world’s largest cruise-ship operator and raised the price estimate for the shares to 2,500 pence. That’s 26 percent higher than yesterday’s closing price.

Elsewhere, Homeserve Plc (HSV) sank 29 percent, a record drop, to 160.90 pence as the company said the U.K.’s Financial Services Authority has started a formal investigation into Homeserve’s past selling practices.

Homeserve, which today reported full-year net income that beat analyst estimates, said it plans to reduce its U.K. business, cutting customer numbers to 2.2-2.4 million in 2013.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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